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  <h1>Life insurance</h1>

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   <p>Actuarial practice is the subject that makes you happy everyday.</p>
   <p> In answering all the questions, notice the following tips. </p>
   <ul>
     <li>For all the questions, you need to state Basic fact + explanation.</li>
     <li>Provide enough details is rather important. </li>
     <li>Even for a “list” question, more explanation is needed than that.</li>
     <li>Give example where appropriate</li>
   </ul>

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    Reasons for the need of capital
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      <ul>
        <li>
          Overall Strategic Direction
          <ul>
            <li>
              Finance new business (as new business costs may exceed revenue) i.e. to meet acquisition expenses and pay commission
            </li>
            <li>For investment projects (e.g. launching new products, new IT systems, merger/acquisition)
            </li>
          </ul>
        </li>
        <li>
          Smoothing Profits
          <ul>
            <li>Smooth results, smooth bonus distributions on with-profit business
            </li>
            <li>
              To pay claims/expenses in excess of premiums i.e. working capital
            </li>
            <li> Maintain a cushion against adverse future experience
            </li>
            <li>
              Meet claims as they fall due. Particularly since the timing of claim payments is highly uncertain
            </li>
            <li>
              Meet the financial consequences of unexpected eventss e.g. credit crunch or stock market volatility
            </li>
          </ul>
        </li>
        <li>
          New Business
          <ul>
            <li> Finance new business strain
            </li>

          </ul>
        </li>
        <li>
          Providing guarantees
          <ul>
            <li>
              Where guarantees and options are provided additional capital may be needed
            </li>
          </ul>
        </li>
        <li>
          Investment strategy
          <ul>
            <li>
              Meet mismatching costs. These may arise due to the investment strategy that the company adopts.
            </li>
          </ul>
        </li>
        <li>
          Attracting business
          <ul>
            <li>
              To attract new business by demonstrating the financial strength of the new company
            </li>
            <li>
              capital can be used to distribute more bonus, and then increase new business volume
            </li>
            <li>
              Capital can be put into marketing, commission, therefore increase new business
            </li>
            <li>
              Capital can be used to finance options and guarantees
            </li>
          </ul>
        </li>
        <li>
          Minimize Regulatory Attention
          <ul>
            <li>
              Required by the regulators. Capital is required to ensure an insurance company has sufficient solvency and cashflow to meet its
              liabilities in all reasonably foreseeable circumstances.
            </li>
            <li> Demonstrate solvency
            </li>
            <li>
              A sufficient level of capital will minimize the risk that the regulator will put restrictions on the firm's activities.
            </li>
          </ul>
        </li>
      </ul>
      <ul>


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  <p> Author: Mengke, Lyu</p>

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